-If the government wishes to correct the existence of a negative externality, it could
A) grant subsidies to consumers to stimulate demand.
B) impose a tax on the producers to reduce supply.
C) impose taxes on consumers to stimulate demand.
D) grant subsidies to producers to reduce supply.

Question

-If the government wishes to correct the existence of a negative externality, it could
A) grant subsidies to consumers to stimulate demand. 
B) impose a tax on the producers to reduce supply. 
C) impose taxes on consumers to stimulate demand. 
D) grant subsidies to producers to reduce supply.

Quizplus · Accepted Answer

Imposing a tax on producers for the negative externality they create makes the cost of producing goods or services that generate negative externalities more expensive. This encourages producers to reduce the supply of these harmful goods or services, thereby addressing the negative externality.

-If the Government Wishes to Correct the Existence of a Negative